The problem with a movie is that they're taking something originally in a visual medium and then telling the same story in a fourth the time in the same medium. Even if the acting and effects were quality, the whole thing would feel rushed.

Most of them. A lot of book 2 was very interlinked and the entirety of Ba Sing Se should be a movie in its own right.

If it were to be broken into 2 movies, I'd place the first as immediately after the Northern Water Tribe battle (obviously) and end it at the library and Appa being stolen. The story would balance Aang's need to find a teacher and Sokka's desire for intel.

The second would introduce Ba Sing Se politics at the serpents pass and end at the fall. Ideally it would be filmed in the style of a political thriller since its one of the darker storylines.

One of the biggest problems was that MNS tried to compress so much of the story and character development, the best parts of the show, into such a short block. Short story long, it'd be hard to reasonably do a live action of the series that a director wouldn't be crucified for. A much better choice would be following another avatar entirely, or any other of a myriad of characters that exist in the Avatar universe.

Agreed, I think they would have to bypass everything besides the swamp and Toph and then start with the drill. But even then, the movie would have to be 3+ hours long to make much sense. I think a book 3 movie would be shorter.

The events in the Avatar State should just be streamlined as a series of nightmares Aang had throughout the movie. After about two or three nightmares, when Aang went Avatar State in The Desert, that when Roku should explain to Aang the dangers of the Avatar State. Azula's introduction and Zuko's side of the story in that episode should start the movie. (5 minutes)

The Omashu plot should be shortened as well. The main points are only two, Azula's first meeting with the Gaang and that King Bumi couldn't be Aang's master. (15 minutes)

Introduction of Toph (28 minutes). This is a completely new character for the audience, and should be given as much spotlight as possible. The Blind Bandit and elements from Bitter Work are essential.

The Library is essential to start the second act of the movie. (17 minutes). Which is for them to travel to Ba Sing Se.

City of Walls and Secrets, a bit of Tales of Ba Sing Se, Lake Laogai, The Guru, and Crossroads of Destiny should be given as much time as possible, as it is a solid story act that needs a lot of time developing. (90 minutes)

All that would be 2.5 hours long, but a lot of movies now are like that anyways. If it's possible to put an extra half hour that would be great.